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GUIDE TO BUSINESS IN TENERIFE Tenerife, April 20 Av. de la Constitución, Santa Cruz de Tenerife, Spain 38005 info@whytenerife.com +34 922 080 769 www.whytenerifecom GUIDE GUIDE TO TO BUSINESS BUSINESS IN IN TENERIFE TENERIFE CONTENT WELCOME LETTER . 4 .1 TENERIFE AT A GLANCE .5 .2 DOING BUSINESS IN TENERIFE . 15 .3 FISCAL FRAMEWORK .25 .4 INCENTIVES FOR INVESTMENT IN TENERIFE .32 .5 RESIDENCY PERMITS . 37 .6 LABOUR MARKET . 40 .7 COSTS . 44 .8 SUCCESS STORIES .46 .9 ABOUT WHY TENERIFE? .48 .10 USEFUL LINKS .50 3 GUIDE TO BUSINESS IN TENERIFE Welcome letter 4 Welcome to Tenerife. This Guide contains relevant information for individuals and companies interested in investing in Tenerife, the largest island in the archipelago of the Canary Islands. In it we seek to respond, in a simple and practical way, Tenerife. access - thanks to its geographical position - to mature European markets and emerging markets in West Africa. Moreover, energies and with the

provision of professional services. GUIDE GUIDE TO TO BUSINESS BUSINESS IN IN TENERIFE TENERIFE .1 TENERIFE AT A GLANCE 5 GUIDE GUIDE TO TO BUSINESS BUSINESS IN IN TENERIFE TENERIFE Spain Canary Islands Canary Islands Tenerife 6 BUSINESS GUIDE IN TENERIFE MAIN INDICATORS I. General Surface 2,034 sq.km Tenerife is the largest island of the Canary Islands 342 Km of coastline Population metropolitan area of the capital Population density Foreign population Working population 536,900 Unemployment rate Time zone GMT Climate II. Economy Currency TENERIFE AT A GLANCE GDP .1 GDP per capita (PPP) Productive sectors - Industry: 7.99% - Construction: 7.36% Working week 7 BUSINESS GUIDE IN TENERIFE Minimum wage 2018: € 735.90 / month, or € 10,30260 / year (14 payments) 2019: € 900.0 / month, or € 12,600 / year (14 payments) Foreign Investment 187 M euros and 30,000 jobs (Canary Islands, 2017) Foreign branches 8 187 (Canary Islands) More than 100

international companies already installed in Tenerife III. Connectivity and Tourism Air connections 2 international airports with 203 airlines operating and connections to 157 destinations 16.5 million in 2018 15,481 T Maritime connections 2 international ports, with access to 278 ports around the world Third cruise port in Spain (more than 500 cruises a year) More than 6 M passengers received per year 5 sport marinas, 790 moorings Convention centers 5 convention centers, including an Auditorium designed by Santiago Calatrava Hotels Tenerife has one of the best hotel accommodation offerings in Europe: 420 hotel establishments and tourist apartments with more than 37,000 four-star TENERIFE AT A GLANCE 50% of the hotels in Tenerife are 4 and 5 star establishments. .1 Tourists received in 2018 5.80 million (17% more than in 2017) IV. Government Government Island Council of Tenerife (Municipal) Autonomous Community of the Canary Islands (Regional) New Statute of Autonomy of

the Canary Island Organic Law 1/2018 of 5 November (Reform of the Statute of Autonomy of the Canary Islands) Sources: ISTAC (2018), INE, FILINT, Registro de Inversiones GUIDE TO BUSINESS IN TENERIFE MAIN REASONS TO INVEST IN TENERIFE and competitive economy, which is in the process Tenerife offers attractive conditions for foreign Strategic location workforce which is part of an active and growing ecosystem, and a mature and developed market that offers privileged access to European markets and emerging markets in West Africa. Indeed, Tenerife’s geographical location, excellent infrastructures, good physical and digital connectivity, unique tax regime, and competitive costs, in a stable and low risk European environment make it one of the most attractive destinations for foreign investment. Tenerife is located in the Atlantic Ocean, in a Europe, Africa and America. Tax advantages ZEC1 access point to the countries of North and West since it is integrated into the main

international trade routes. REF2 Economic and legal certainty Availability of talent and qualified professionals economy in the world and the 4th economy Tenerife offers entrepreneurs and investors TENERIFE AT A GLANCE consecutive years of growth, the last four with .1 9 economy. Tenerife is a multicultural territory where more than 110,000 foreigners live. with all the guarantees of legal security, Tenerife low risk environment. The good growth prospects of the Canary Islands, attest this potential through its educational offer in areas such as 1 https://canariaszec.com/ 2 http://www.gobiernodecanariasorg/economia/ asuntoseconomicosue/ref/informacion general/index.jsp GUIDE TO BUSINESS IN TENERIFE Mathematics, Business Administration, Tourism Connectivity Knowledge hub with cutting edge infrastructure 10 Its multicultural and welcoming society facilitates the integration of displaced professionals and investors and their families in an environment conducive to the

reconciliation of personal and professional life. Thanks to its leading position as a tourist destination, Tenerife has developed good training centers and schools with educational communications infrastructures. It has a quality health infrastructure that meets Tenerife has a developed and attractive market TENERIFE AT A GLANCE technologies and services, since its environment .1 island with Europe and West Africa, Tenerife has two Tenerife Sur3 and Tenerife maritime connectivity5. Norte4 Quality of life 3 4 5 Government of the Canary Islands, and the private centers. leisure and sports offerings, together with an internationally renowned cuisine. GUIDE TO BUSINESS IN TENERIFE RESOURCES AND PRODUCTIVE SECTORS Among these we can cite the following: of the local economy, while strengthening the island as a technological and knowledge center. Activities related to the digital economy, the Astrophysics Institute of the Canary Islands2 energies have gained weight in recent

years. Institute of Technology and Renewable Energies3 The Canary Islands’ Centre for Biomedical Research CIBICAN4 Tenerife also has state of the art communication and data connectivity infrastructures, which University Institute of Tropical Diseases5 technological parks and research centers. Canary Islands Volcanology Institute6 Among these unique resources, one of the most Intech Tenerife7 High Performance Computer1 out. Tenerife also has other top-level technological TENERIFE AT A GLANCE solutions in areas such as astrophysics, health .1 1 http://teidehpc.iteres 2 3 4 5 6 7 http://www.iaces/ http://www.iteres/ http://www.cibicanorg/ http://www.controlenfermedadestropicaleses/fundacion/ http://www.involcanorg/ http://www.intechtenerifees/ 11 GUIDE TO BUSINESS IN TENERIFE INVESTMENT OPPORTUNITIES Tenerife, with an economy traditionally based on tourism, is moving towards promoting itself as a technological and knowledge center. Activities related to the digital

economy, the creative and cultural industries, the blue economy, tourism, professional services or renewable energies have gained weight in recent years. The main sectors of opportunity for investment in Tenerife are: Digital economy With a mature and sophisticated local market, Tenerife has a high potential for growth in Europe, Africa and Latin advanced digital environment. The island to attract international talent thanks to its high standards of living. Creative and cultural industries incentives, make it one of Europe’s most competitive markets for creative and cultural productions, such as for audiovisual productions and the Tenerife has a solid audiovisual sector These conditions, the fact that it is TENERIFE AT A GLANCE 45,000 related workers. Within the marine sector, Tenerife has advertisements. meet any need. .1 Blue economy direct activity in the Canary Islands, 7.4% On the one hand, the Canary Islands Conducting multiple commercial operations in different

national and international territories through digital production and marketing, electronic commerce, software and app development is a very attractive 12 hours per year, the diversity of its natural places in Europe to host audiovisual productions of any type1. 1 https://www.webtenerife transit and activity in three continents and for the provision of services to the platforms that currently operate in the area. National and foreign companies operate in Tenerife in activities related to naval repair, oil & gas, offshore, cold storage GUIDE TO BUSINESS IN TENERIFE Tourism Professional services Tourism in the Canary Islands is a leading industry thanks to the great reputation The opportunity in the professional services segment lies in the advantageous quality-cost-security infrastructures and services, with air connections with strategic markets and traditional issuers. Its versatility and telecommunications infrastructures and data connectivity, university educated

and multilingual talent, competitive salary costs and training aids. activities related to services and value propositions in the tourism, leisure and sports sectors. Tenerife is a very attractive territory for multinational companies interested in important source of income and a key element to the economic growth of Tenerife, with an outstanding companies are already present on the island. 13 Renewable energies and Cleantech especially solar and wind energy, and great dependence of the Canary Islands on highly polluting fossil fuels offer great potential for the development of alternative energy and clean technology. The Government of the Canary Islands aims to ensure that 45% of its demand for electricity in 2025 comes from with resources such as the Institute of continuous evolution and renewal, this sector registers growth opportunities mainly in specialist areas such as health 1 2 TENERIFE AT A GLANCE institutions in their sectors. .1 The main related activities that

present opportunities in the sector include: self-consumption, storage, waste management and recycling and electric 1 2 GUIDE TO BUSINESS IN TENERIFE Centers of Excellence and R&D Hub for West Africa Due to its strategic location, legal and 14 Start-ups and digital nomads Tenerife is a priority destination for Tenerife has a strong capacity to Europe, many foreign companies with investments in Africa have installed their thanks to its determined commitment Canary Islands, turning the islands into other infrastructures. Its competitive environment for the development of its activities on the island. main European destinations, as well as Tenerife’s world-renowned avant-garde Tenerife, with its modern infrastructures increase its attractiveness. for an assistance center for the offshore industry. Tenerife allows you to have a Water and waste treatment. to many important destinations. an incentive that consolidates Tenerife climate and quality of life for digital

nomads, service providers or corporate retreats of technology companies. In recent years an important TENERIFE AT A GLANCE created in Tenerife, with new coworking .1 private support infrastructures, competitive costs in a high quality European destinations at competitive prices1. 1 http://tenerifeworkandplay.com/ GUIDE TO BUSINESS IN TENERIFE .2 DOING BUSINESS IN TENERIFE SELECT THE TYPE OF ESTABLISHMENT The island of Tenerife, as part of the Autonomous Community of the DOING BUSINESS IN TENERIFE investors wishing to operate on the island. .2 15 GUIDE TO BUSINESS IN TENERIFE 16 The basic differences between them are the following: Incorporation of a Spanish Company with its Own Legal Personality Limited liability entrepreneur The Spanish legislation provides foreign investors with different types of commercial entities when investing in Spain. The most used corporate forms are the Sociedad Anónima (corporation) and, mainly, the Sociedad de Responsabilidad

Limitada (limited liability company). DOING BUSINESS IN TENERIFE .2 Associations with other entrepreneurs already established in Spain. They allow investors to share risks and combine resources and experience. In the Spanish legal system there are different forms of joint venture, which are explained in this Chapter: · Economic Interest Grouping (E.IG) and European Economic Interest Grouping (E.EIG) · Temporary Business Association (T.BA) · Conclusion with one or more Spanish businesspeople Spanish legal system: “the participation account”. · Joint ventures through corporations or limited liability companies. Development of the activity directly by a natural person certain requirements. Branch or permanent establishment Joint Venture personality, so their activity and legal responsibility will always be directly linked to the parent company of the foreign investor. Without establishing an operations center in Tenerife The various alternatives in this regard are the

following: · Concluding a distribution agreement. · Carrying out the transactions through an agent. · Carrying out the transactions through a commission agent. · Establishment of a franchise. GUIDE TO BUSINESS IN TENERIFE 17 The most used corporate forms Corporation (S.A) Limited Liability Company (S.L) Minimum share capital 60.000 euros 3.000 euros Minimum disbursement at the time of the incorporation of the company 25% and the share premium, if applicable. Totality. Contributions An expert is needed to value the nonmonetary contributions. It does not take an expert to assess the non-monetary contributions, but the partners are jointly and severally liable for their authenticity. Capital subscribed in the form of Shares. Participating interests. Stocks/Shares They are considered transferable securities. They are not considered transferable securities. Transmission of shares Freely transmissible, except for prohibition in the bylaws. It must be included in a

notarized document. They are not freely transferable generally, but free transmission can be foreseen in the bylaws. the Corporation, since they go a step further in limiting the DOING BUSINESS IN TENERIFE only risk the assets they invest, .2 GUIDE TO BUSINESS IN TENERIFE Corporation (S.A) Limited Liability Company (S.L) Requires prior information on the implications involved. This task is performed by the administrative bodies Does not require a report Place of celebration of the General Meeting According to what is outlined in the bylaws According to what is outlined in the bylaws Assistance Quorum It is established depending on whether it Different majorities are established depending on the agreements to be adopted. They can also be raised by the bylaws. DOING BUSINESS IN TENERIFE subject of the agreements. Quorums can be raised by the bylaws. .2 18 Right to attend A minimum number of shares may be required to attend the General Meetings. The right to attend

cannot be restricted. Number of board members Minimum of 3, without a maximum. Minimum of 3, maximum of 12. Duration of Administrator position 6 years, though can be re-elected for the same period(s). GUIDE GUIDE TO TO BUSINESS BUSINESS IN IN TENERIFE TENERIFE The main steps to incorporate any of them are the following: 1 2 In the event that it is being carried out through a representative, he or she must be granted a power of representation by the founder/s. (NIF), in the case of a legal entity, or in the case of individuals, partners and foreign administrators of the company to be incorporated. Without these numbers, non-resident persons or entities will not be able to conduct legal business in Spanish territory. .2 DOING BUSINESS IN TENERIFE 3 of company name, which serves to reserve the desired company name and avoid duplication. Please note that, if six months pass after the issuance of registering the company name in the Provincial Commercial Register, the chosen

name will be free again for other companies to use. 4 determine how the contribution of social capital will be organized. In this phase, the shareholders must contribute the funds to subscribe the necessary capital for the constitution of the company, according to their percentage stake in the social capital. Opening of current account in the name of the company for making monetary contributions and obtaining bank This transaction may be subject to the anti-money laundering and prevention 10/2010, of April 28th). 5 ownership acts. • The bylaws will be necessary to organize and regulate the functioning of the company and its members. The nature of the company’s activity must impact (for example, in cases of real estate development). • be drafted according to Law 10/2010, of April 28th. In accordance with this law, people who hold more than 25% of the social capital of the company 19 GUIDE GUIDE TO TO BUSINESS BUSINESS IN IN TENERIFE TENERIFE 6 Constitution before a

Notary, through the granting of the deed of incorporation, within a period of six months starting 9 7 Request for the Company’s Provisional 10 requested before making any delivery, provision or acquisition of goods or services, collecting or making payments, or hiring workers. In any case, the request must be made within the month following the date of incorporation of the legal entity or entity without legal personality. .2 DOING BUSINESS IN TENERIFE 8 Registration in the Commercial Registry. The registration period is 15 working days, counting from the date of presentation of the deeds in the Registry. 11 12 Registration in the Treasury, for the purposes of the Economic Activities Tax. The registration should coincide with the moment the company begins operating. Settlement of the Capital Transfer Tax. This tax must be settled and paid within one month from the date of the act or contract, that is, the date the deed or private contract is granted. NOTE: Both corporate

forms will be validly constituted once the public deed of incorporation has been granted (the founding act). However, the company will not have legal personality and, therefore, be responsible towards third parties, until the company is properly registered in the Mercantile Registry. 20 GUIDE TO BUSINESS IN TENERIFE TAX IDENTIFICATION NUMBER (NIF) AND IDENTIFICATION NUMBER FOR FOREIGNERS that natural or legal persons that carry out their 21 Administration Agency2 or telematically , or numerous occasions in recent years. INTELLECTUAL PROPERTY its creation, although its registration in the since it constitutes material proof of the the case of natural persons. trademarks, software, etc., with which when a foreign investor makes a direct investment application for its registration. The environment of Tenerife and its location, together with the legal protection in this area, provide an environment conducive to invention. a conducive environment for creativity and 1 STOCK

MARKETS are: Rental agreement of an apartment up recent mechanisms with which the results Access to the capital market is a strategic in the knowledge economy. capital markets are particularly attractive, occupying a relevant position on the international scene. Enrolling in the Town Hall Census DOING BUSINESS IN TENERIFE Opening a bank account .2 Subscribing a private insurance scheme similar to the Social Security One of the strategic policies of the Canary Islands Government focuses precisely on promoting research, development and innovation and Registering in the National Police and development is in line with the productive model 1 knowledge generated in Tenerife. 1 https://www.seatmprgobes 2 https://www.agenciatributariaes Sistema de Interconexión Bursátil Español Bolsas y Mercados Españoles This platform, as well as the stock indices, are GUIDE TO BUSINESS IN TENERIFE 22 If the following prerequisites are met, the information transparency and legal

security criteria for all participants, in addition to promoting the liquidity of negotiated products. All this under the supervision of the National market: 1. securities markets and the activities of those involved in them. a. b. Ensuring the transparency of the Spanish securities markets and the correct formation of prices Ensuring the protection of investors DOING BUSINESS IN TENERIFE market in terms of volume of new investment .2 communication and investor relations are crucial. Public limited company with totally disbursed capital and without restrictions of transferability. 2. The shares are represented by book entries 3. Minimum capital of 1,202,025 euros, without counting stakes greater than or equal to 25%. 4. 5. Minimum market value of 6,000,000 euros. least 25% distributed among the public. prerequisites to entering the stock market, such as: the presentation and registration in AUDIT AND FINANCIAL REPORTING If the entity meets two of the three requirements

1. When the total sum of its assets exceeds 2.850000 euros 2. When its net turnover exceeds 5.700000 euros. 3. When the average number of workers during the year exceeds 50. since its incorporation, transformation or merger, audit their accounts if they do not meet, at the end of that year, at least two of the three requirements annual accounts, the presentation, approval There are other situations in which a company prospectus etc. other circumstances. GUIDE TO BUSINESS IN TENERIFE Once the need to audit or not the company accounts is known, the different types of audits in External auditor or legal auditor professional with proven training Issues an opinion opinion Internal Auditor Is an employee of the company Informs and recommends work done responds to the person who Evaluates the internal control system and proposes improvements improvements DOING BUSINESS IN TENERIFE Depends on his own professional ethics .2 Operational auditor parties Issues reports

with proposals for improvement the accounting period continuously Depends on the agreement use of the company 23 GUIDE GUIDE TO TO BUSINESS BUSINESS IN IN TENERIFE TENERIFE REGISTRATION IN THE CANARY ISLANDS SPECIAL ZONE ZEC3 4. Its corporate purpose must be compatible with the realization of within the ZEC. 5. DOING BUSINESS IN TENERIFE island of Tenerife must comply with the following requirements: 1. 2. 3. Be a newly created legal entity or branch management center in Tenerife. At least one administrator or legal representative (in the case of branches) must reside in the Canary Islands. .2 3 http://www.canariaszeccom Make investments in tangible or intangible assets which are necessary for the development of economic years following its registration, for a minimum amount of 100,000 euros. 6. Create a minimum of 5 jobs in Tenerife within 6 months of being registered. 7. Present a descriptive report of the economic activities to be developed endorsing its

solvency, viability, international competitiveness and its contribution to the economic and social development of the Canary Islands. Corporate tax 4% of Entities of the Canary Islands Special Zone (ROEZEC) development of the Canary Islands, as well as a deposit or guarantee for the amount of the registration. 24 GUIDE TO BUSINESS !"#$%&(&)"*#+%& IN TENERIFE #+&%+%,#-% 25 .3 FISCAL FRAMEWORK CANARIAN INDIRECT GENERAL TAX (IGIC) DOING BUSINESS IN TENERIFE The Canary Islands Economic and Fiscal Regime (REF1) includes particularities such as the following: .3 The Canary Islands, due to their insularity, enjoy a differentiated tax treatment and apply their own indirect tax, known as the Canarian Indirect General Tax (IGIC). The IGIC taxes the supply of goods and services rendered by businesspeople and professionals in the Canary Islands, as well as the import of goods into the Canary Islands whatever the nature of the importer. The general rate is

7%, compared to the general Spanish VAT rate of 21%. The IGIC is very similar to VAT: input tax and output tax are borne by the taxable person, such as the exemption established for telecommunications services. 1 https://www.gobiernodecanariasorg/asuntoseuropeos/ ref/informacion general/ CANARY ISLANDS SPECIAL ZONE The Canary Islands Special Zone (ZEC) is an area of low taxation that was created within the framework of the Economic and Fiscal Regime of the Canary Islands “with the purpose of propitiating the appropriate framework for the establishment in the Canary archipelago of foreign capital and companies“, as well as promoting the economic and social progress of the Canary Islands and the creation of quality employment. Its geographic scope extends to the entire territory of the Canary Islands. The entities of the ZEC are subject to a reduced Corporate tax rate of 4%, compared to 25% nationally or 21.3% on average in the European Union. This highly advantageous tax rate is

applied to the tax base derived from the operations carried out materially and effectively in the Canary Islands. The following rules apply in Tenerife: GUIDE TO BUSINESS IN TENERIFE Number of jobs Tax base limit 5 jobs 1,800,000 € 6-50 jobs +500,000 € / job +50 jobs No limits Income Tax for Non-residents ZEC companies can also: Invoke the agreements signed by Spain to avoid double taxation Take advantage of the Parent-Subsidiary Directive of the European Union, which implies that dividends distributed by a subsidiary in the ZEC to its parent company resident in another EU country are not subject to withholding. from include the following: Exemption from IGIC The companies that operate in the ZEC are and services rendered to each other, as well as for the imports of goods that they make. FISCAL FRAMEWORK dissolution of the company-, or the documented legal acts linked to the operations carried .3 RESERVE FOR INVESTMENT IN THE CANARY ISLANDS (RIC) of stimulating

investments made with the companies own resources, that is to say, the selfdevelop their activity in the Canary Islands. Based on this, companies that operate in Tenerife have a regardless of where the company is domiciled. Exemption from Capital Transfers and Documented Legal Acts Tax The acquisition of goods and rights for the development of the activity of the ZEC company in the Canary Islands, the corporate operations 2 2 www.zecorg 26 GUIDE TO BUSINESS IN TENERIFE investments: TENERIFE FREE TRADE ZONE 27 TAX ON CAPITAL TRANSFERS AND DOCUMENTED LEGAL ACTS Creation of establishments or extension Development and technological innovation. Subscription of securities or annotations in the Canary Public Debt account. for the storage, handling or transformation of merchandise, regardless of origin, destination, quantity or nature. It offers advantages in terms of that increase the participation in a certain entity Subscription of shares or participating interests in the

capital of companies investing in the Canary Islands. and more than 50% of the assets of the company In fact, its main advantage compared with the rest 3 Tenerife and Granadilla, offering the logistical FISCAL FRAMEWORK which helps streamline the entire inspection process. .3 4 3 http://www.gobiernodecanariasorg/economia/ asuntoseconomicosue/ref/informacion general/index.jsp 4 http://zonafrancatenerife.es/ GUIDE TO BUSINESS IN TENERIFE CUSTOMS CORPORATE TAX the importation of products. worldwide income. 28 purposes, normally when the transaction is that share shareholders or a Board of Directors, parties that are valued at a normal market value, certain relevant documentation and other documents related to these transactions with Duty -AIEM- which seeks to protect certain As a general rule, the amount levied under the the Customs value of the product, depending on the tariff heading. In the same way, the previous considerations on the Canarian Indirect General With

regard to merchandise from outside the general accounting principles, although there are for the year. decrease in value of the asset and it is recorded trade agreements. FISCAL FRAMEWORK the methods provided in the Commercial Code. However, any variation in an asset’s value caused .3 as income. value. In terms of capital gains, gains on transfers of assets are treated like any other source of Notwithstanding the foregoing, in certain cases, temporary and quantity limits. GUIDE TO BUSINESS IN TENERIFE The tax rate is 25%. Special tax regimes under the scope of Corporate Tax Consolidated tax regime 29 PERSONAL INCOME TAX rule, a person who spends more than 183 days in innovation. that the various companies that comprise commercial or professional activities or their General tax rate 25% Reduced rate for foundations and associations 10% group for the total sum of the withholding Reduced rate for entrepreneurs 15% that make it up, allowing automatic Reduced

rate for cooperatives 20% the different companies within the group. Reduced rate for investment companies 1% ZEC Entities 4% Foreign Securities Holding Entities (ETVEs) includes mainly salaries, income derived from the economic activity, income derived from real estate, the mere ownership of real estate and certain capital gains. as a whole and a scale for every Autonomous holdings in foreign companies. They are, and capital gains of foreign origin. In fact, the depending on the level of income. The national scale includes 5 sections, while the scale for investors that want to channel funds for the development of their international investments through a holding company FISCAL FRAMEWORK income greater than 90,000 euros, is 46.5% .3 Fiscal neutrality regime for restructuring operations, in line with other EU Member States. GUIDE TO BUSINESS IN TENERIFE 30 Autonomous scale of the Personal Income Tax (Canary Islands) Bracket Net base (from €) Rest of net base (up

to €) Total quota Applicable rate 1 0 12.450,00 0 9,5 2 12.450,01 5.257,20 1.182,75 12,0 3 17.707,21 15.300,00 1.813,61 14,0 4 33.007,21 20.400,00 3.955,61 18,5 5 53.407,21 36.592,90 7.729,61 23,5 6 90.000,01 en adelante 16.328,92 24,0 19% taxable savings income. 21% for between 6,000.01 and 50,000.00€ of net income from taxable savings 23% for net income of taxable savings of 50,000.01€ and above Personal Income - state scale FISCAL FRAMEWORK Bracket .3 Net base (from €) Rest of net base (up to €) Total quota Applicable rate income, integrating and compensating the interest, monetary returns or payments in kind in 1 0 12.450,00 0 9,5 2 12.450,00 7.750,00 1.182,75 12,0 3 20.200,00 15.000,00 2.112,75 15,0 4 35.200,00 24.800,00 4.362,75 18,5 5 60.000,00 en adelante 8.950,75 22,5 GUIDE TO BUSINESS IN TENERIFE INCOME TAX FOR NON-RESIDENTS contain a very attractive regime for foreigners include: Not

having been a resident in Spain during the 10 tax periods prior to being transferred to Spanish territory. The displacement to Spain is the result of an employment contract. Since 2015, administrators who are not owners of the company or those who own capital but whose control (direct and indirect) does not exceed 25% are also included. FISCAL FRAMEWORK Not obtaining income that would qualify as income obtained through a permanent establishment in Spain. .3 31 GUIDE TO BUSINESS IN TENERIFE .4 INCENTIVES FOR INVESTMENT IN TENERIFE Investment in Tenerife is attractive not only because of its unique environment and dynamic economy, but also because it is a destination that enables the creation and development of JOB CREATION AND TRAINING Subsidies for permanent and full-time hiring of unemployed people. Every contract will be subsidized with 5,000 euros are unemployed. INCENTIVES FOR INVESTMENT IN TENERIFE grants and subsidies in different areas, among .4 1 development,

aid for industrialization, Regional Economic Incentives, ICO lines or SODECAN instruments stand out. or long-term unemployed persons, the amount will be increased by 1,000 euros. Incentives for Employment. They are subsidies for companies that hire unemployed people who have carried out a non-regulated professional training activity in the last three years for a minimum period of six months. made in the Canary Islands are higher than those applied in the national territory. The following are of special interest to the foreign investor: 1 32 GUIDE TO BUSINESS IN TENERIFE AUDIOVISUAL SECTOR 33 TANGIBLE ASSETS offers interesting advantages for audiovisual 100% when hiring women in occupations in which women are underrepresented. activities -in the latter case, provided that deepincentives for training at a national level2, there are other regional or local agencies in Tenerife that provide aid. The initiatives of the Island Council of Tenerife Tenerife amounts to 40-45%, while

the incentive for foreign productions is 40%, with a limit of 5.4 million euros. ports and are manipulated or processed in the archipelago. The productive activities included in the sectors CEDeI3 are especially interesting for foreign companies, particularly those that are more focused on These incentives, together with Tenerife’s climate, natural conditions, diversity of landscapes, coal industries. INCENTIVES FOR INVESTMENT IN TENERIFE professionals who want to focus their career in .4 RESEARCH, DEVELOPMENT AND INNOVATION programs complement the important investment innovation, including the development of video 40 - 45% Deduction for investments in audiovisual productions 2 Guía de incentivos y ayudas estatales de ICEX-Invest In Spain: http://www.investinspainorg/invest/es/canal-de-informacion/ documentacion/como-hacer-negocios-en-espana/4568635.html 3 http://cedei.iteres/ activities developed in the Canary Islands that involve the development of new products or Tax

deductions for R&D GUIDE TO BUSINESS IN TENERIFE 34 mechanism to promote the sale or commercial support policies in several OECD countries and partner economies to encourage private through the development of the following activities: Innovation, since these investments are seen as essential to increase the competitiveness of companies and their countries and help them adapt to the current changing environment. Technical-economic evaluation and companies. Management and promotion of Spanish participation in international cooperation programs. Compared to other countries in our environment, Promotion of the international transfer of business technology and support services for technological innovation. activities in the country. Support for the creation and consolidation of technology-based companies. INCENTIVES FOR INVESTMENT IN TENERIFE plans, formulas or secret procedures and even .4 5 Its programs and initiatives are usually developed In the Canary Islands, the

deduction for 45%. CDTI The Center for Industrial Technological One of its most interesting programs for technology companies, especially in its early 4 Patent Box companies. It is the entity that channels the 6 4 http://www.cienciagobes/ 5 http://www.minhapgobes/ 6 http://www.cdties/ GUIDE TO BUSINESS IN TENERIFE 35 Tenerife Innova to foster innovation in companies. The main technological entrepreneurs and co-investment Through programs such as TFinnova7, the Island Council of Tenerife offers all the actors involved in the island’s productive system a unique access and cooperation with Canary Islands research INCENTIVES FOR INVESTMENT IN TENERIFE REGIONAL INCENTIVES Big companies 35% Medium sized companies 45% Small companies 55% these aids include transforming industries and production support services that include advanced technology, pay attention to technologies and the provision of services in facilities that have an innovative character and improve the

endogenous potential of the area. previously determined areas. Their aim is to SODECAN through the promotion of the creation of Canary Islands, SODECAN8 of the Government of the Canary Islands that development and consolidation of the industrial an approved investment of more than 900,000 The civil works, capital goods, preliminary studies in covering market failures. 9 .4 7 http://www.tenerife2030com/tenerife-innova/ 8 https://www.sodecanes/ 9 www.gobiernodecanariasorg/promocioneconomica/incentivos regionales/ GUIDE TO BUSINESS IN TENERIFE SPECIFIC FOR FOREIGN COMPANIES Tenerife, offering advice on practically all the ICEX-Invest In Spain Technology Fund staff. to the Ministry of Industry, Trade and Tourism, promotes the attraction of investments in There are also special deductions -15% of the amounts invested- for entities domiciled in the Canary Islands with an average workforce of less than 50 employees and a turnover of less than 10 million euros for

investments in West African 10 favors investment in plants, equipment, human resources and technology from international companies in the country. INTERNATIONALIZATION Its different annual calls are intended to institution that represents, promotes and defends foreign capital are understood as those that have that they generate an increase in the average workforce in their operations in the Canary Islands. the province of Tenerife. It offers information, advisory and training services, acts as a launches, opening and prospecting of markets INCENTIVES FOR INVESTMENT IN TENERIFE Direct Investment greater than or equal to 10%. .4 36 that this investment reaches a minimum of 10% of the share capital of the applicant. Likewise, the requirement of a minimum foreign investment of administrations and participates in the promotion of Tenerife’s economic activity. it comes to addressing markets in Latin America and especially in Africa, offering its AFRICA infomarket11 that

percentage of foreign investment is indirectly reached, through the participation in the capital of a third entity that, in turn, participates in the capital of the applicant. information on most of the countries of the In addition, it has a one-stop shop that facilitates procedures for the creation of companies in 10 www.investinspainorg 11 similar nature. GUIDE GUIDETO TOBUSINESS BUSINESS IN INTENERIFE TENERIFE 37 .5 RESIDENCY PERMITS RESIDENCY PERMITS The free movement of workers and the freedom to provide services are fundamental principles of the Treaty on the Functioning of the European Union that guarantee the mobility of companies and professionals within the Union. EU citizens have the right to seek employment in another EU country, to work in another country without a work permit, to reside in another country for work reasons or to remain in it when they have stopped working, and to receive the same treatment as the citizens of the host country. .5 investors,

entrepreneurs or workers: 500.000 € euros in real estate VISA AND RESIDENCE AUTHORIZATION FOR INVESTORS 1.000000 € euros in a bank deposit or 1.000000 € euros in shares in a Spanish company 2.000000 € euros in Spanish public debt grants several advantages to foreigners who want either for a one-year residence visa or a residence GUIDE TO BUSINESS IN TENERIFE 38 As a special visa category, the investor residence years, provided that the investment made is maintained. The processing of the investment visa is done of origin or residence of the applicant, while the residence of the applicant. Entrepreneurs have a year to complete the necessary procedures to start the proposed activity and, once 1 RESIDENCE AUTHORIZATION FOR ENTREPRENEURS have the option of applying for residence may apply for a visa or a residence permit for RESIDENCE AUTHORIZATION FOR HIGHLY QUALIFIED WORKERS RESIDENCY PERMITS age or single adults or the parents of the investor who are

economically dependent on the investor, as well as the parents of the investor, provided that these depend economically on the investor. .5 activity or product of an innovative nature or in favor of the worker so that they can come to later separately. account. 1 http://prie.comercioes/es-ES/Paginas/Programa-de-Residenciapara-Inversores-y-Emprendedores-%28PRIE%29aspx Two different cases are contemplated: GUIDE TO BUSINESS IN TENERIFE a. A transfer of workers from a company located outside Spain to another company of the same group in Spain. If the worker has been employed for a minimum period in the company of origin, a residence and work permit can be obtained through a relatively simple procedure that should not take more than a month. RESIDENCY PERMITS It is important to remember that in these cases workers are still considered as being employed in their country of origin, and that they are coming to Spain simply to provide services to the Spanish company by an agreement

signed between the companies, and that in most cases they will continue to be listed in the Social Security or equivalent in their country of origin .5 b. 39 Companies of a certain size have the option In addition, the company must meet some of the following requirements: countries and processing a residence and work authorization for them. This is a quick and simple procedure that should not take more than a month. It is essential in these cases that the worker has completed A staff of more than 250 workers in Spain. the salary that is offered. Volume of annual net business turnover in Spain over 50 million euros. Volume of own funds or net worth, in Spain, higher than 43 million euros. Average annual gross investment from abroad of at least 1 million euros in the three years prior to the submission of the application. Companies with a stock value of more than 3 million euros. GUIDE GUIDE TO BUSINESS TO BUSINESS IN TENERIFE IN TENERIFE .6 LABOUR MARKET GENERAL MATTERS

Labor relations in Spain are regulated by the provisions of Royal Legislative Decree 2/2015, of October 23, which approves the Workers’ Statute. This regulation has been adapted and modernized over the years, with the aim of stimulating the labor market and fostering employment and investment. Minimum working age work. As with wages, collective agreements or individual work contracts can modify this that they cannot work overtime or work at night. Wages working day in certain cases. amounted to 735.60 euros per month or 10,30260 euros per year, in twelve monthly payments and Vacation time and public holidays Employees are entitled to a minimum of 30 calendar days of vacation per year. In addition, LABOUR MARKET rose to 900 euros per month. .6 In any case, it is the collective agreements that determine the minimum wage for each professional group, which, in any case, is always equal or superior to the previous one. Working hours Working hours, in general, are set to a A

minimum rest of one and a half days a week is mandatory. Social Security As a general rule, all employers, their workers, cooperatives, among others, must register and 40 GUIDE TO BUSINESS IN TENERIFE LABOR RELATIONS FRAMEWORK Reduction and / or bonus of a company’s contributions for common contingencies to 1,199.10 euros for engineers and graduates-, while term contracts Reduction and / or bonus of a company’s contributions for common contingen- In practical terms, employers must remit the -29.9% under the general system, 311% for temporary contracts- and deduct and remit the corresponding payments for their workers -6.35% Trial periods Companies can agree on a trial period to check the skills of a new worker. During this period, LABOUR MARKET pleading any cause, without notice and without the right to compensation. .6 common contingencies corresponding to each month will be exempt from the company’s contribution. When the contract is concluded on a part-time basis,

said amount shall be reduced in proportion to the percentage in which the working day decreases, which may not be less than 50% of the day of a full-time worker. Employment Service, in case the permanent contract is formalized with young people enrolled in the National Youth Guarantee System. The application of the bonus or reduction does not interfere in the determination led, which will be calculated by applying the full amount of the contribution base that corresponds to them. The bonus or reduction will be applied during a period of 24 months. In the case of companies with less than ten workers, the measure will be extended for a proportionally corresponding in the cases in the cases of part-time hiring. 41 GUIDE TO BUSINESS IN TENERIFE Fixed term contracts Unemployed people or people working with a part-time contract, provided that their working day is less than one third of the working day of a comparable full-time worker; people who are in a situation of social exclusion;

recipients of the Guaranteed Minimum Income, etc. For every worker signed with a temporary contract, companies can obtain a bonus of 41.67 euros / month (500 euros / year) in their social security contributions during the entire term of the contract. formed into permanent contracts, companies will be entitled to a bonus in their Social Security payments of 50 euros / month (600 euros / year) for four years. LABOUR MARKET transformed into a part-time one, the bonus will be applied in the terms of article 2.6 of law 43/2006, of December 29, according to article 6.2 of Law 27/2009, of December 30. .6 Trainee and apprentice contracts 42 When the contract is concluded with an unemployed worker who is registered as a job seeker: Companies will have the right, during the whole term of the contract, including extensions, to a reduction of 100% of the company’s contributions to the Social Security for common contingencies, as well as those corresponding to accidents at work and

occupational diseases, unemployment, wage guarantee fund and professional training, related to said contracts, if the contract is concluded by companies whose staff is less than 250 people, or 75%, in the event that the company Trainee and apprentice contracts concluded or extended as provided in the previous paragraph, will be entitled to a reduction of 100% of the contributions of workers to the Social Security throughout the term of the contract, including its extensions. In the case of workers enrolled in the National Youth Guarantee System, this incentive, in the same percentages, will consist of a bonus from January 1, 2020. GUIDE TO BUSINESS IN TENERIFE 43 Labour costs in Europe, € per hour of the Board of Directors of a company can Islands and Tenerife are among the lowest: the national average. LABOUR COSTS Average total labor costs per employee in Spain and Tenerife, in euros Tenerife offers an attractive environment for operational costs in a low risk environment

within in gross terms per hour, are 21% lower than the National total Tenerife Industry 3,135 2,453 21.8% Construction 2,721 2,324 14.6% Services 2,497 2,201 11.8% than the Nordic countries. Source: INE, 2Q-2018 50 Labour costs in Europe, € per hour 40 30 LABOUR MARKET 20 .6 Difference 10 0 Source: Eurostat, 2018 GUIDE GUIDE TO BUSINESS TO BUSINESS IN TENERIFE IN TENERIFE 44 .7 COSTS LAND AND PROPERTY sources such as Numbeo1 place Tenerife around Tenerife offers quality spaces in which to set up at very competitive prices. with costs equivalent to 16.9% of those registered As a reference, average rental prices of industrial euros per square meter for industrial spaces, depending mainly on the location and the activity such as Health, Biotechnology, Tourism Innovation or ICT. COSTS 5 and 10 euros per square meter. International INtech2 .7 1 2 GUIDE TO BUSINESS IN TENERIFE SUPPLIES Water The price of water in Tenerife depends on the

Electricity The most common electricity rates for companies in Tenerife are the following: Power less than or equal to 10kW 45 Capacity term: Energy charge: Power more than 10kW but less than 15kW Capacity term: 3.973137 Power above 15kW Direct negotiation with electricity companies Energy charge: price of non-domestic drinking water is as follows: From 0 to 10m3 0.64 € / m3 3 From 11 to 20m 1.05 € / m3 More than 20m3 2.61 € / m3 When calculating costs, it is necessary to take into fee for the meter. Cost of Living which are very competitive compared to the rest COSTS As a guideline, the average consumption of a four- .7 less than 50% of those registered in New York, while costs in Madrid are 60.8% of those in New York, while Barcelona’s are 61.2% GUIDE TO BUSINESS IN TENERIFE .8 SUCCESS STORIES 46 GUIDE TO BUSINESS IN TENERIFE More than 100 foreign owned companies already operate in Tenerife, harnessing the advantages offered SUCCESS STORIES

DIGITAL ECONOMY .8 FOOD INDUSTRIES CREATIVE INDUSTRIES PROFESSIONAL SERVICES TRANSPORT AND ENERGY TOURISM 47 GUIDE TO BUSINESS IN TENERIFE .9 ABOUT WHY TENERIFE ABOUT WHY TENERIFE Why Tenerife offers potential foreign investors advice on the opportunities, tax and competitive advantages and necessary information about Tenerife, in the Canary Islands, as a destination for their business. It gathers in a single platform useful information on the requirements necessary to start operating in Tenerife and on those sectors that represent a and European markets. PARTNERS ABOUT WHY TENERIFE a point of reference and support for foreign companies and entrepreneurs interested in .9 competitiveness. integrates the Port Authority of Tenerife1, the Island Council of Tenerife (Cabildo de Tenerife)2, the Chamber of Commerce of Tenerife3, the Canary Islands Special Zone (ZEC)4 and the Tenerife Free Zone (Zona Franca de Tenerife ZFT)5. 1 2 3 4 5 https://www.puertosdetenerifeorg/

http://www.tenerifees https://www.camaratenerifecom/ https://www.canariaszeccom/ http://www.zonafrancatenerifees/ 48 GUIDE TO BUSINESS IN TENERIFE SERVICES and free advice services to investors, companies or entrepreneurs interested in establishing their businesses and improving their competitiveness from Tenerife. It adapts its services to the needs of each investor, whether the investor is considering setting up in on the island. Pre-investment services Information services: preparation of tailored reports for investors, entrepreneurs or companies, including information on taxes, procedures and administrative procedures, labor regulation, work and residence permits, establishment of companies, costs, locations in Tenerife or concrete investment opportunities information on grants and incentives available for each investment project, in collaboration with the other entities with competences in Tenerife, the Canary Islands and Spain. Access to capital Preparation of the

investment: help in identifying legal requirements and requesting licenses and permits. Organization and coordination of agendas, meetings and guided prospection tours. Institutional visits. 49 Investment Consultancy and project management: personalized advice during the implementation process in Tenerife. Facilitation of contacts and accompaniment during negotiation and dialogue with local, regional and national authorities. local partners for each investment project. Referral to relevant institutions, universities and research centers, companies and private equity and venture capital funds for the development of associations or alliances. Support in the search for the ideal location in Tenerife. Help for obtaining residence and work permits. Support services for displaced employees (softlanding). Aftercare services ABOUT WHY TENERIFE Growth and expansion: high-level networking with institutions and companies, support in .9 for suppliers, location services, incentives,

connection with clusters and research centers, etc. Advocacy: interlocution before the Island Council of Tenerife on behalf of the companies that already operate in Tenerife to improve the business climate on the island. GUIDE TO BUSINESS IN TENERIFE .10 .10 USEFUL LINKS USEFUL LINKS 50 GUIDE TO BUSINESS IN TENERIFE Tenerife Knowledge hubs Cabildo de Tenerife: http://www.tenerifees/ SODECAN: https://www.sodecanes/ Turismo de Tenerife: https://www.webtenerifecom/ Tenerife Film Commission: Instituto Astrofísico de Canarias: http://www.iaces/ ITER: http://www.iteres/ Teide HPC (High Performance Computer): http://teidehpc.iteres/ CIBICAN - Centro de Investigaciones Biomédicas de Canarias: http://www.cibicanorg Instituto Universitario de Enfermedades Tropicales: http://controlenfermedadestropicales.es/fundacion/ Involcan: http://www.involcanorg/ INtech Tenerife: https://www.intechtenerifees/ Instituto Tecnológico de Canarias: http://www.itccanariasorg D-Alix Data Centre:

http://d-alix.com/ Universidad de La Laguna: https://www.ulles/ Universidad Europea de Canarias: https://universidadeuropea.es/canarias Tenerife Forward: https://www.tenerifeforwardcom/ Canary Islands Gobierno de Canarias: https://www.gobiernodecanariasorg/ Proexca: https://www.proexcaes/ National entities .10 USEFUL LINKS ICEX-Invest in Spain: http://www.investinspainorg Casa África: http://www.casafricaes/ CDTI: http://www.cdties/ Infrastructures Aeropuerto-Tenerife Norte: http://www.aenaes/es/aeropuerto-tenerife-norte/indexhtml Aeropuerto-Tenerife Sur: http://www.aenaes/es/aeropuerto-tenerife-sur/indexhtml Puertos de Tenerife: https://www.puertosdetenerifeorg/ 51 Guía de de Negocios en Tenerife